Depth of electronics industry: copper clad laminate continues to rise in price and downstream demand grows steadily [institutional review]

The cost of raw materials continues to rise, driving up the profitability of copper clad lamins. the price of electronic copper foil, the largest material, is affected by copper prices and processing fees, and prices continue to rise. As copper prices continue to rise, copper foil processing costs rise, electronic copper foil production capacity shortage, copper foil prices are expected to continue to grow. Due to the high concentration of the copper clad laminate industry and the dispersion of the PCB industry, when the copper price of the raw materials rises, the copper clad laminate manufacturers upstream of the circuit board can raise the price and transfer the cost to the downstream PCB manufacturers, and the price increase of the copper clad laminate exceeds the increase of the upstream raw materials, thus increasing the gross profit margin.

The demand in the downstream is growing steadily, and there is a huge room for domestic substitution.

The rapid growth of industry demand will be driven by the increase in 5G infrastructure, the improvement of the level of automotive electronics, the demand for servers and the increasing demand for domestic alternatives. Compared with 4G base station, the value of single station copper clad laminate of 5G base station increases greatly. With the advance of 5G infrastructure, the demand of related copper clad laminate will continue to grow. We estimate that the demand for electronic car will bring 2.3 billion yuan in 2022. Benefiting from factors such as the calculation of the east and the west and the improvement of cloud access rate of enterprises and institutions, China's server market will also grow rapidly. It is estimated that the demand for copper clad laminate brought by servers in 2022 will be 3 billion yuan. The improvement of the level of automobile electronization is a deterministic trend. according to the New Energy vehicle Industry Development Plan (2021-2035), the sales volume of new energy vehicles will grow rapidly, and intelligence and networking are the development trend of the global automobile industry. automotive electronization will contribute the largest market increment, and we estimate that automotive electronization will bring 12.5 billion yuan of demand in 2022. Domestic export copper clad laminate products are mainly low value-added FR-4 copper clad laminates and other products, while high-tech high-frequency high-speed copper clad laminates, packaging substrates and other products rely heavily on imports. In 2018, more than 80 per cent of the market share of high-frequency copper clad laminates was dominated by US and Japanese companies such as Rogers and Taikangli. The main suppliers in the high-speed CCL market were Panasonic of Japan, Lianmao and Taiwan of Taiwan, and Isola of the United States, accounting for about 65 per cent in 2018. Domestic alternative space is huge, giving high-quality local manufacturers an opportunity.

Domestic manufacturers have a complete product line and have gained a certain share in the field of high-end products. the global production capacity of Chinese domestic manufacturers accounts for about 20%. Domestic manufacturers have fully covered the mainstream specification products from low end to high end, and high-end products have also gained a large share. Sino-British science and technology has the highest market share in the field of high-frequency copper clad laminates, with 6.4% and 4.8% respectively. Shengyi Technology has also made a large share in the field of high-speed copper clad laminate. With the progress of domestic substitution, the share of domestic manufacturers is expected to continue to increase.

Investment suggestion

Benefiting from the rising product prices, steady demand growth and domestic substitution, we suggest that we pay attention to the relevant companies in the copper clad laminate industry and give the electronics industry an "overweight" rating.

Risk hint

Technological progress is not as expected; domestic substitution is not as expected; downstream demand is not as expected; the progress of price increase is not as expected.